Abstarct: Fast and selective overcurrent protection system can play a vital role in maintaining the stability and reliability of distribution and sub-transmission networks. Considering dual settings for relays can improve the operating speed of directional overcurrent relays. On the other hand, today the use of distributed generation sources to increase the reliability of the network, reduce losses, and congestion of lines is of great interest.The change in short-circuit levels of the power network due to the presence of synchronous-baxsed distributed generation resources may lead to the miscoordination of overcurrent relays. Moreover, the harmonics of injected current by inverter-baxsed distributed generation sources may violate power quality constraints. Therefore, determining the optimal penetration level of these resources, while considering protective and power quality constraints, is of high importance.This thesis proposes a new approach for coordinating directional overcurrent relays by considering dual settings for the relays, determining the optimal relay characteristic curve, and simultaneously determining the optimal penetration level, type, and location of distributed generation resources while satisfying the mentioned constraints. To evaluate the proposed method, the IEEE 14-bus system and a real sub-transmission network in Iran are used. The obtained results indicate an improvement in the operating speed of the protective system, an increase in the maximum penetration of distributed generation resources, and a reduction in active power losses, considering dual settings and selecting the optimal performance characteristics for overcurrent relays.